Most of the alleged flaws of capitalism can be laid at the feet of government. From Diyar Kasimov at mises.org:
Is building more homes not enough? Recently, there have been more and more Gen-Z memes about boomers selling their overvalued houses to BlackRock instead of to young couples, and then the corporation rents the house to the couple for 2x the price. The housing crisis is not a false alarm. The median rent price went up 25 percent in just 6 years. This is a serious economic problem for America.
Many young people are already being radicalized by this, as they are willing to elect socialist Zohran Mamdani—who called for abolition of private property once—as the mayor of New York City. But what can we do? Are rent controls now relevant, as globalization and financialization changed the rules of the game? Can European-style social-democrats like Mamdani, Bernie, and AOC control the markets elegantly enough to maximize supply?
Only two percent of economists support rent control. But economists, especially mainstream ones, can be wrong quite often. This time, however, they are right. Price controls discourage new supply and exacerbate shortages. Lack of price signals lead to mismanagement of resources, because developers can’t see where houses are needed the most, so developers and landlords have no incentive to rent there, leading to lack of housing which eventually leads to higher prices and lower vacancy rates.
If rents are allowed to increase freely, they would initially go up in certain areas, incentivizing developers and landlords to provide more housing options. This will lead to increased competition and, therefore, falling prices.
Examples of this can be seen all around the world. In California, after the introduction of rent controls in Berkeley and Santa Monica, rental units decreased 8 and 14 percent respectively; in Boston and Brookline, by 12 percent. Housing construction fell by 80 percent in St. Paul after rent control was introduced. Companies were disincentivized from providing rental units, as they felt the reward was not high enough.
